Sugar substitutes: How sweet it is!

09 July 2007 00:00  [Source: ICB Americas]

INCREASED USE of sugar substitutes due to growing concern about obesity and diabetes is sweetening the pot for alternative sweeteners producers' profits.

Last year, more than 10% of US coffee drinks had added sugar substitutes, up from 8% in 1997, according to market information provider NPD Group. Around 20% of Americans consumed a low-sugar, sugar-free or artificially sweetened food item at least once in a two-week period, up from 14% in 2001.

"Use of sugar substitutes to sweeten beverages is increasing," says Harry Balzer, vice president of NPD Group. "Americans love sweets but they might be coming down from their sugar highs as health concerns such as obesity and diabetes grow."

In the last 52 weeks ending June 17, US sugar substitute retail sales (excluding from Wal-Mart) was estimated at $369.7m, up 2% from the year-ago level, reports market data provider Information Resources Inc.

Splenda, which uses the high intensity sweetener (HIS) sucralose continues to hold the largest share in market sales at 61% followed by Sweet & Low (saccharin) with 13%, and Equal (aspartame) also at 13%.

US demand for alternative sweeteners that include HIS and polyols is projected to increase 4%/year to $1.1bn in 2010 from $935m in 2005, says Freedonia Group analyst Mike Richardson.

"HIS such as sucralose, saccharin, aspartame, cyclamate and acesulfame potassium remain the largest product category due to their leadership position in diet soft drinks and tabletop uses," he adds.

Freedonia projects US HIS demand to increase 2% to $595m in 2010 from 2005.

"In diet soft drinks, aspartame and acesulfame will remain the leading products due to their use in many of the top brands," says Richardson. "Sucralose use will continue to expand in the tabletop sweetener market while aspartame's and saccharin's shares will decline. Saccharin's presence in oral care products, however, will remain significant," he adds.

North America accounted for 59% and 63%, respectively, of global aspartame and sucralose consumption last year, according to SRI Consulting.

"The US is the largest market for aspartame, acesulfame and sucralose. Asia, meanwhile. accounts for most of cyclamate and saccharin global consumption largely because of their low cost," says SRI analyst Sebastian Bizzari. "Diet beverages and food are becoming more popular for health reasons, and large volumes of cyclamate and saccharin are used to replace sucrose in many Asian countries and other developing regions."

Volume-wise, cyclamate is the largest HIS consumed worldwide followed by saccharin, says SRI. Consumption for cyclamate is banned in the US and Japan.sticking to polyols

Growing demand for sugar-free, low-calorie, and low glycemic index (GI) foods is also driving the growth of the polyols market, which includes sorbitol, maltitol, xylitol, lactitol, erythritol and mannitol.

"Polyols, which are mainly used in food applications, will continue to benefit from their image as natural products rather than synthetic chemicals, and from continued interest in reducing sugar intake to combat obesity, tooth decay and diabetes," says Freedonia's Richardson.

"Sorbitol is the largest market and will register below average growth. Xylitol will register above average advances as it has been shown to kill bacteria, which can cause dental cavities, a property that many candy and gum manufacturers have seized upon in product labeling and advertising," he adds.

Freedonia forecasts US polyols demand to reach $430m by 2010 at a growth rate of 5%/year.

Frost & Sullivan projects US polyols sales to reach $822m in 2012 from $516.7m in sales posted in 2005.

"The key factor driving the growth of polyols is their obvious health benefits," says Frost & Sullivan analyst Ashwin Sukumaran. "Sugar-free products are now highly in demand in application areas such as chewing gum, desserts, baked goods and confectionery. Polyols are ideally placed to capitalize on these trends as they are comparable to that of sugar in terms of sweetness but have low caloric content combined with their non-cariogenic and low GI properties," she adds.

Sweet and sour

Despite polyols' multiple benefits, high manufacturing costs continue to plague the market according to Frost & Sullivan.

"Techniques for fermenting and extracting polyols from fruit and vegetable matter are traditionally more expensive than chemical synthesis through which artificial sweeteners are made," says Sukumaran. "Moreover, strong capacity utilization in the corn wet milling industry has pushed up prices for corn syrups, which are used to produce polyols, thus narrowing the profit margins."

R&D is likely to be instrumental in reducing production costs. "Recent research using modified bacteria strains look promising in terms of offering a cheaper method of polyols manufacture. Economies of scope are also likely to offer cost advantages to manufacturers in the future," says Sukumaran.

For HIS, although demand is expected to grow, market value will be suppressed by falling prices mostly from patent expirations and new competitors.

Sucralose producer Tate & Lyle is already facing competition from Indian and Chinese manufacturers, while aspartame producer DSM recently exited the market.

The safety of certain HIS is also being scrutinized by various advocacy groups. The Center for Science in the Public Interest is currently asking the Food and Drug Administration to review a new study released by an Italian group on the possible carcinogenicity of aspartame.

STEVIA: BEATING THE REAL THING?

Stevia, an ingredient that comes from the leaves of a stevia plant native to Paraguay, is being sourced as the next blockbuster alternative sweetener in the Western market.

Coca-Cola Company and Cargill recently formed a global partnership to develop and market their own stevia-based calorie-free sweetener called rebiana. Coca-Cola will use rebiana in their line of beverages while Cargill will develop and market the product for use in food applications.

"Rebiana is sourced from the best-tasting parts of the stevia plant. Compared to stevia that exists in the marketplace, rebiana is a consistent product with no lingering aftertaste," reports Cargill. "In Japan, 80% of the country's high intensity sweetener market is stevia. In the US and Europe, stevia is sold as a dietary supplement."

China currently grows 80% of the world's stevia. Sunwin International Nutraceuticals of China says it believes to be the largest stevia producer worldwide, accounting for 30% of the estimated 2,000 short tons/year of global production.

The company recently doubled its annual capacity to 600 tons to support the launch of its stevia-based alternative sweetener OnlySweet product line in North America. Sunwin says it is planning to increase its overall capacity to 1,000 tons/year in the near future.

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